​National Russian card payment system established

Russian President Vladimir Putin signed into law the establishment of a national Russian card payment system on Monday. The NSPK (National Card Payment) system will ensure the smooth operation of electronic payments across Russia.

Both Visa and MasterCard blocked specific US-sanctioned Russian
banks from using their payment systems in March amid the crisis
in Ukraine, prompting sharp criticism for blocking bank
operations.

On April 28, the US imposed sanctions against seven further
Russian individuals and 17 different Russian companies, among
them SMP Bank, Sobinbank, and InvestCapitalBank.

The NSPK law was passed in response to the cessation of some
functions of Visa and MasterCard systems which happened under the
US sanctions. Bank Rossiya was one of the first hit (considered
by the US Treasury to essentially be a private bank for Russian
officials). It, along with SMP Bank, predictably responded to the
limitations by supporting the establishment of the new system.

Both banks were hit by a drop in consumer confidence which
occurred after the sanctions kicked in.

The law requires foreign payment systems to make interim
quarterly contributions to a special account in the Central Bank
of Russia from July 1, equal to 25 percent of the average daily
turnover.

The Russian parliament approved the bill last month. According to
Central Bank estimates, creating the infrastructure for the
launch of a national payment system could take as long as half a
year. However, administering the cards to the general public
could take as long as two years, with 100 million cards needing
to be issued.

The new act stipulates that payment system operators and service
operators, in addition to participants of the payment system, are
not entitled to unilaterally abandon the provision of services
necessary for the successful execution of any transfers.

Russian authorities also intend to seek to establish a national
payment card which not only works within the country, but also
abroad.

Last Thursday, Visa and MasterCard expressed concern over the
potential impact. “I can see it will make it a more
complicated situation for anybody that has a payment network in
Russia,” MasterCard chief financial officer Martina
Hund-Majean told the Financial Times.

Both companies said they are now considering possible risks to
their business given the new legislation.